Tech Talent’s Rising Cost is Spooking Investors

The stunning news that Google was paying upwards of $150 million in retention bonuses to keep a couple of “indispensible” employees is just the latest sign of a Silicon Valley hiring scene that’s getting pretty intense. Salaries and other costs are rising so quickly that, as Marketwatch reports, shareholders and investors in some of the leading Valley high flyers are starting to take note, and not in a good way.

The problem is that people make up most of the costs in brain-driven companies like Google, Facebook and Twitter. Intellectual capital is expensive to grow, preserve and protect — especially when patent battles require legions of attorneys to fight out. In fact, legal wins and losses over patents can move stocks significantly in an instant.

Last year’s 10 percent across-the-board raise at Google was worth slightly less than $850 million. “That’s great for the Silicon Valley housing market, but bad for Google investors,” notes MarketWatch. As tech salaries rise across the country, so do the costs of benefits and health insurance, adding to the fiscal pressure.

Then there’s the issue of keeping R&D racing ahead when positions for top engineers go unfilled for months. With innovation at risk of slowing, employers are even more likely to throw money at the problem, hiking up salaries and signing bonuses even more.

That tactic may work for a cash-rich public company like Google, but VC-backed innovators like Facebook and Twitter — or those who want to grow up to become like Facebook and Twitter — must be wondering how much finding and keeping the best talent is going to pressure their bottom lines.

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One Response to “Tech Talent’s Rising Cost is Spooking Investors”

So, lessee here. Top lawyers make $500K to $1 million. Same goes for top doctors. And let’s not even discuss top financiers. But, a 10% raise for the best geeks? Unspeakable!

Can anyone think of any other profession where we feel compelled to do all sorts of “selling” of the profession to high schoolers in a desperate hope that more of them will pursue it? Can you imagine rah-rah sessions trying to get more students into law, finance, or medicine? Not needed — those fields pay well enough to draw sufficient talent (perhaps more than sufficient in finance) into them. But when it comes to engineering, we can’t accept that perhaps the price just needs to go up instead of trying to talk everyone into studying it. Other nations don’t have this problem; engineering is valued as law or medicine there.